Tuesday, February 14, 2012

Facebook Going Public: What It Means for Users' Privacy

Facebook’s Geniuses Know it All. Or Do They?

I once wrote to Facebook's customer service department to demand to know why I had to choose from a list of cities to fill in my "Current City" field on my profile. In my message, I accused Facebook programmers of pretending to know it all; there are so many cities in the world -- how could they possibly list them all?

Being a persuasive writer, I have managed to get U.S. Senators and cabinet-level ministers and secretaries to reply to my correspondences before, but I guess I am more important to politicians as a constituent than I am as a user to Facebook, for Facebook never replied to my message.

Later on, I figured out why Facebook insists on only letting users choose from a list of cities to describe where they are from and where they currently live in, instead of letting users fill in the fields themselves – potential in making money from marketing. This New York Times op-ed explains it succinctly:

[U]nlike other big-ticket corporations, it doesn’t have an inventory of widgets or gadgets, cars or phones. Facebook’s inventory consists of personal data — yours and mine.
Facebook makes money by selling ad space to companies that want to reach us. Advertisers choose key words or details — like relationship status, location, activities, favorite books and employment — and then Facebook runs the ads for the targeted subset of its 845 million users. If you indicate that you like cupcakes, live in a certain neighborhood and have invited friends over, expect an ad from a nearby bakery to appear on your page. The magnitude of online information Facebook has available about each of us for targeted marketing is stunning.

If Facebook allowed users to fill in those fields themselves, it would be much more difficult for Facebook to provide demographic information to advertisers who are their main source of revenue. For example, if a user were to merely put “Aurora” in the “Current City” field, would s/he be referring to "Aurora, Illinois" or "Aurora, Colorado" or "Aurora, Victoria" or "Aurora, Ontario"? There are so many places in the world named Aurora and Facebook could not possibly sell ad space to potential advertisers based on such vague descriptions.

Facebook as a Marketing and Marketing Research Company

Five years ago, in my business strategy class at the Singapore Management University, my instructor asked the students what kind of business we thought Google was in. Google had then just become the world’s fastest growing search engine whose market share was overshadowing Yahoo!’s. We answered that it was in the internet communication and search industry. My instructor said that it was really in the marketing industry. He was right – since then, an entirely new industry has been created around Google; companies have been founded, careers have been made and books have been written and published solely on helping businesses and organizations rank higher on Google. Personally, I have written on how to use free social media tools to help one’s small/medium business rank higher on Google.

Facebook is not in the social media business. It is, like Google, in the marketing business. Now that Facebook is going public, it will certainly face pressures from its shareholders to increase profits. Where does Facebook’s profits come from? The same New York Times article I block-quoted earlier states that 85% of Facebook’s revenue comes from advertising – that’s to users like you and me. Facebook hires from among the smartest and the most creative; they will figure out a way to make more money from personal data and other means, such as being a sales website. I predict that in the medium-to-long run, Facebook will go into the marketing and advertising research industry, and be the leading authority on demographic data, overshadowing the likes of the Nielson Company and its famous Nielson Ratings.

So What?

What does this mean for everyday users of Facebook? Since Facebook’s most valuable asset is our personal data, it will entice you to share more and more of your life on the social networking website. In fact, it already has attempted to share more about your past by implementing the timeline feature and will slowly force every user to adopt that type of profile eventually.

So what, you say? It’s no big deal – you don’t mind letting people know about your life, past and present. Really? As Facebook grew and evolved over the years, it has engaged in questionable tactics to force users to share information with others, such as implementing a de facto "follow" feature or failing to inform users that they have to opt out of being automatically tagged in pictures by the facial recognition technology. It is to Facebook's benefit for you to share as much with as many people as possible, whereas it is not necessarily to your advantage to do so.

Facebook is growing at an extraordinary rate. Like any other company that grows at such a quick pace, it occasionally commits a mistake. So far, it has been great with online security, but mistakes like this one in April 2011 where email notifications were reset accidentally, this one in late 2010 where some applications improperly shared data with third parties, or this one in late 2010 where deleted pictures weren’t really deleted beg the question of how long it would be before users’ security is compromised.

Personal information that you have posted on Facebook may be used against you. Status updates and pictures that you have uploaded on Facebook may:

  1. stop you from getting a place in graduate program,
  2. cause you to lose a job opportunity,
  3. cost you your job or reputation,
  4. allow the government to invade your privacy,
  5. allow the police to track you,  
  6. lower your credit worthiness,
  7. render your online banking account susceptible to hacking,
  8. identify you in public areas (especially with Facebook’s facial recognition feature and technology),
  9. inspire you to do really stupid things, and
  10. cost you your divorce settlement.
Setting the highest privacy controls won’t really help. There is no harm doing that, however. Here are some more tips:

  1. clean up your Facebook (and other social media) accounts
  2. be careful about what you post
  3. don’t reveal information on Facebook that you wouldn’t post on your front door
  4. avoid uploading inappropriate photos
  5. don’t talk about your job on Facebook unless you have something good to say
  6. stay away from the details while you’re at that
  7. even though it is tempting – and some may say it is the whole point of Facebookdon’t brag on Facebook.

And if you have found yourself on the wrong side of social media, it’s not the end of the world, especially if you can afford to pay. It may be expensive though.

Like this blog? Please like it on Facebook! You may like I Lost My Job Because of Social Media. Follow me on Twitter (@nicholas_cheong).

1 comment:

  1. Excellent post! How are you? Are you in the one percent now? How is the new job? I promise I won't tell anyone, except maybe a few door- greeters!